A Texas appellate court on Thursday ruled that federal aviation law does not preempt state law regulating the payment for medical services and sent a long-running fee dispute between air ambulance providers and workers compensation insurers back to a trial court.

PHI Air Medical LLC provides emergency air ambulance services and is licensed as an air carrier by the Federal Aviation Administration and as an air taxi by the United States Department of Transportation, subjecting it to federal oversight. As a provider of emergency medical services, PHI is also subject to state regulation and when it transports an injured worker, the Texas Workers’ Compensation Act governs its payment.

The payment due to providers is often set by fee guidelines promulgated by the Texas Division of Workers' Compensation, but if the division has not adopted an applicable guideline the insurer must reimburse the provider a “fair and reasonable” amount.

A dispute arose between PHI and a group of air ambulance providers and insurers related to the transport of 33 covered workers between 2010 and 2012, according to documents in PHI Air Medical LLC. Texas Mutual Insurance Co., filed in the Texas Court of Appeals, 3rd District, in Austin.

After the carriers paid less than the billed amount by the air ambulance providers, PHI and others began filing fee disputes with the division arguing that the Airline Deregulation Act preempted the TWCA’s reimbursement provisions, the effect of which was to require Insurers to pay billed charges in full. The ADA prohibits the states from enacting regulations that have a significant effect on airline pricing.

The appeals court said the TWCA did not have a significant effect on PHI’s prices, at least at this stage in the proceedings when the proper amount of reimbursement has not been finally adjudicated and that the ADA does not preempt the TWCA’s regulation of air carrier reimbursement.

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